Question

News reports from the western United States occasionally report incidents of cattle ranchers slaughtering many newborn calves and burying them in mass graves rather than transporting them to markets. Assuming that this is rational behavior by profit-maximizing "firms," explain what economic factors may influence such behavior. Justify your answer.

Answer 1

The profit-maximizing firm maximizes profit by producing an output that is consistent with equalization between marginal revenue and marginal cost. The cattle ranchers raise livestock for wool and meat. These ranchers are slaughtering coughs and not selling them to market. The reason behind this rational behavior in terms of the producer can be two-fold:

1. The rancher may see a decrease in demand for meat from time to time and raising a calf can be costly given the decreasing demand and hence revenue. Thus, to keep profit in line they often slaughter mini newborn coughs and burying them in Mass Grave

If the selling price is not sufficient to cover the variable cost of sending the calves to market, this (potentially emotionally upsetting) behavior makes economic sense.